New trade deal could boost Colorado’s economy

The Colorado economy may be profoundly impacted by trade negotiations taking place on the other side of the globe. American officials are currently putting the finishing touches on a major new international trade agreement. [1]

The Trans-Pacific Partnership (TPP) involves some of the major economies of the Asia-Pacific region. Negotiators have spent years hammering out its details. And one of the major TPP provisions still under debate deals with so-called “data exclusivity” — intellectual property protection that allows biopharmaceutical research firms to keep their scientific data secret for a preset period of time.

For the sake of Colorado’s economy and patient population, the TPP needs to include robust data exclusivity protections.

The TPP involves the United States along with Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Japan recently expressed interest in joining as well. The agreement’s overall purpose is to fully open up the markets of all partner nations, scale back trade barriers like quotas and tariffs, and establish shared rules of fair play in trade.

Colorado’s economy is closely tied to the TPP partner nations. Approximately two thirds — or $4.5 billion — of our state’s total annual exports go to Asia-Pacific markets. And about 68,400 local workers are employed by exporters.

The TPP is critical to the future of our economy as well. The agreement is setting rules for highly innovative sectors of the economy which is where the bulk of future growth will come from, particularly in emerging markets.

Data exclusivity is a centerpiece of this effort. It’s a form of protection specific to a class of pharmaceuticals called “biologics,” which are highly advanced drugs derived from living organisms. Creating biologics is an extremely expensive and time-consuming endeavor, requiring well over a billion dollars on average to bring a drug from lab to market.

Biologics are dramatically more chemically complicated than traditional pharmaceuticals. As a result, they’ve proven significantly more effective at combating major illnesses like Alzheimer’s, Parkinson’s, and HIV/AIDS. The most effective treatments of the future will likely be biologics.

It’s possible to create rough copies of biologics that have similar therapeutic effects but are chemically different. Therefore, if a competitor firms has access to the research data behind a new biologic, they can create a knock-off version and eat into the original’s market share while skirting traditional intellectual property protections.

By preventing other firms from accessing the research behind a new biologic, data exclusivity effectively prevents competitors from creating knock-offs. Thus, the original innovator is afforded market exclusivity. This creates a financial incentive for firms to take the huge financial risk to create new biologics. And those drug save and extend millions of American lives.

Without a robust data exclusivity statute, investors may be wary of plowing new money into developing biologics. After all, there’s already a very high risk they’ll spend all that money and have nothing to show for it. But if they do wind up supporting a successful drug, and there isn’t data protection, competitors will be able to immediately dive into the research behind that new treatment, create a knock-off, draining the innovator’s profits and incentives for future research.

Without data exclusivity, there would be a very low chance that any drug — no matter medically miraculous or popular among patients — would be able to earn enough to make it economically worthwhile for the firm to create it in the first place. New biologics would become guaranteed money losers.

Firms would stop investing in new biologics. That, in turn, means fewer new lines of research and fewer new jobs in the Colorado pharmaceutical sector.

State unemployment is at 8 percent. That’s better than rates during the worst of the financial crisis. But this state still needs a lot more jobs. Weak or non-existent data protections in the TPP would squash local job growth and make it even harder for Colorado to get to full employment.

What’s more, undermining new drug development hurts patients. They would lose out on the next generation of breakthrough biologics that might contain or even cure their condition.

There’s ample evidence indicating that 12 years is the appropriate length for data exclusivity protection. That amount of time gives innovators a fair shot at recouping their costs while allowing competitors to subsequently introduce lower-cost alternatives. So the TPP should include a 12 year data exclusivity provision.

Colorado has much to gain if TPP negotiators settle on a smart deal. Strong intellectual property protections would help ensure this state’s biopharmaceutical sector continues to grow, creating much-needed new jobs for locals and literally life-saving treatments for patients.

Dr. Kristina Lybecker is an associate professor of economics and business at Colorado College.